SRA to double subsidy on South Central rail line

The subsidies paid to the train operator South Central to run commuter services between London and the South Coast, are to double under a deal signed yesterday with the Government's Strategic Rail Authority.

The subsidies paid to the train operator South Central to run commuter services between London and the South Coast, are to double under a deal signed yesterday with the Government's Strategic Rail Authority.

Govia, a joint venture between the UK transport group Go-Ahead and France's Keolis, part of the state-owned SNCF, will receive £670m in taxpayers' support over the next six and a half years to operate South Central. This works out at £103m a year compared with £53m a year under the old franchise which expires later this month. Go-Ahead shares rose 22.5p to close at 690p.

Govia took over South Central from the French-owned Connex in August 2001 after Connex was deemed not to be providing passengers or taxpayers with value for money and was stripped of the franchise.

A spokesman for the SRA said the big increase in subsidies was needed to enable South Central to pay for a £1bn investment programme which includes £900m worth of new trains.

The taxpayer could face an even bigger bill because Govia will need to be compensated by the SRA for not being able to bring the bulk of the new trains into service until the power supply for the south of England rail network has been upgraded to cope with the extra rolling stock. Only a quarter of the 700 new Electrostar carriages are currently in operation and the entire fleet will not be able to enter service until 2005.

But the SRA spokesman said the subsidy involved was still less than if the SRA had stuck to its original plan to award Govia a 20-year franchise on South Central which would have involved the company in a £1bn upgrade of the line.

Govia is 65 per cent owned by Go-Ahead and 35 per cent-owned by Keolis. It will run South Central until the end of 2009. The investment will include a new £856m fleet of 700 Electrostar carriages made by Bombardier to replace the old slam-door rolling stock and £50m for 36 new Turbostar diesel carriages. Govia will also invest £100m on new depots and £20m refurbishing existing Class 455 metro trains.

Chris Moyes, deputy chief executive of Go-Ahead, said about 15 per cent of the new carriages on order represented additional capacity. He also said that despite the big increase in subsidy, Govia could still lose money if revenues turned out to be lower than forecast in its bid for the franchise.